ESO's Monthly Start-Up

January 2025

The 2025 IPO Pipeline

While we normally like to do our Year in Review Intro for this first newsletter of the month, Pitchbook and Crunchbase both haven’t released their year-end data quite yet, so we are going to punt that intro to our February edition. For this one then, we thought it would be fun to make some IPO predictions. There are a lot of clickbaity “Top 10 Companies IPO’ing in 2025” lists out there, so we want to try to make ours a little more nuanced to cut through some of that noise. So without further ado, our IPO predictions, broken down by Most Exciting, Least Exciting, and Pipe Dream.

Most Exciting

This is definitely our top IPO we are excited about this year, as we expect CoreWeave to ride the AI wave right to the public markets. While not as high profile as true AI startups like OpenAI and Anthropic, CoreWeave offers access to data centers and high powered chips for AI workloads. These are primarily supplied by Nvidia, one of the company’s main backers. The company is supposedly targeting over a $35 billion valuation for IPO, and given the market’s current appetite for new AI investment opportunities and the company’s recently completed $650 million secondary share which valued it at $23 billion, we think they are likely going to be able to get that.

FinTech’s have had it rough the past two years, so its pretty fun hearing about some of the older ones that want to exit this year and what kind of valuations they may command. Klarna, the BNPL company, reached profitability in 2024 and is reportedly seeking a $20 billion valuation for its IPO this year. Analyst’s have recently put the company’s valuation at roughly $14.6 billion after Crysalis Investments increased its stake during the second quarter of 2024. While this is above the $6 billion valuation that the company raised at in 2022, it is still a far cry from the 2021 party era valuation of $45 billion. While not at the same level as 2021, Affirm, another high profile BNPL company, has seen its revenue multiples recover over the past 2 years, and now may be a great time for Klarna to seek an exit. It will be really interesting to see where this one ends up shaking out.

Least Exciting

Cerebras Systems was supposed to go out this past year, but has been postponed due to a CFIUS review delay. While the company does have the AI tailwind behind them, there are a lot of red flags here that we think may hurt them in the public market. For one, none of the leading three investment banks (Goldman, Morgan Stanley, or JP Morgan) want to touch it.  Additionally, there is some major customer concentration risk, with one company accounting for 87% of their revenue. They may get some traction with the AI boost, but it will be interesting to see how the public market reacts to all the issues here.

StubHub has been dangling the carrot that they will be going public for a while now, targeting a valuation of at least $16.5 billion. The company has been working with JPMorgan and Goldman over the past two years on the IPO, and while they are blaming market conditions for holding off, with recent IPOs and the overall market having performed well last year, there are really no more excuses to keep holding off.

Pipe Dream

Stripe is on a lot of “Top 10 Going Public this Year” lists, but we aren’t holding our breath. Stripe has indicated they are in no rush to go public, and unless something crazy happens, we don’t see it happening this year.

Same as Stripe, everyone is wanting to see a Databricks listing in 2025. However, given their recent funding round this past month (that valued them at a whooping $62 billion) and with no need for cash, we doubt we will see an exit here this year unless the market conditions are really above and beyond.

Tips of the trade

A section where we provide helpful tips for anyone with stock options or shares at private companies.

How to Handle Equity in January

RSUs, NSOs, or Shares from an NSO Exercise
If you own RSUs, NSOs, or shares from a prior NSO exercise, there are no time-sensitive actions required at the start of the year. However, if you're interested in accessing liquidity, consider options like ESO Fund or the secondary market.

  • Calculate Your AMT Threshold: Determine how many ISOs you can exercise without triggering the Alternative Minimum Tax (AMT). If the cost is manageable and you believe in your company’s future growth, it might make sense to exercise some or all of your ISOs below the AMT threshold.

  • Timing for Large Exercises: For exercises in 2025 that exceed the AMT threshold, you won’t owe AMT until April 2026.

    • Example: If you expect your company to IPO this year, exercising your ISOs now could be advantageous. You wouldn’t owe AMT until April 2026, when your shares may already be tradable on public markets.

  • Selling in 2025: If you both exercise your options and sell your shares in 2025, you won’t owe AMT, but profits will be subject to ordinary income tax instead of long-term capital gains.

Shares from an ISO Exercise in 2024
If you exercised ISOs in 2024, you’ll owe AMT this April. Use our AMT Calculator for a quick estimate, but we recommend consulting a CPA or a tax service like TurboTax for precise calculations.

If covering your AMT cost is a concern, ESO Fund can help. We can fund your AMT liability and even reimburse your exercise cost, giving you financial flexibility while retaining your equity.

Funding your option exercise can be expensive and a require a large capital outlay. Feel free to reach out to us to discuss your options for partnering with ESO to exercise your options risk-free.

The ESO Fund does not provide legal, financial, or tax advice.

Public Multiples Check-in: "Yesterday's Price is not Today's Price"

The market finished lower in December for the most part, with both the Dow and the S&P down 5.3% and 2.5%, respectively. The NASDAQ was flat for the month, up 0.5%. However, this was only the third negative month of the calendar year. With the NASDAQ and S&P finishing at over 20% for the year, and the Dow finishing at over 10% for the year, overall it was a great year for public markets. Multiples year-over-year remained strong, with only FinTech and HealthTech seeing compression.

Why this matters: As we mentioned earlier in the IPO section, poor market conditions is no longer a valid excuse for not IPO’ing. At some point, they will either have to go, or admit their financials aren’t good enough to make it.

December's Top Ten:

  1. Many dealmakers were hoping that the Trump administration was going to bring a more favorable regulatory M&A environment. His head of the DOJ antitrust division is throwing some cold water on that sentiment. Gail Slater, the aforementioned nominee, is known for aggressive crackdowns on Big Tech, which may make some M&A deals tougher this year.

  2. ServiceTitan IPO’d this past month and so far, has been fairing well, even despite some hair on their most recent private fundraising round. The company targets businesses in plumbing, landscaping, electrical and other trades, with software for managing sales leads, recording calls, generating quotes and scheduling jobs. As of writing this, the stock is trading at around $101 a share, an approximate 42% uptick from their IPO price.

  3. SpaceX feels like an unstoppable force right now, and the valuation just keeps growing. The company hit a $350 billion valuation this past month based on a secondary sale.

  4. Databricks raised $10 billion this past month in a Series J round that values the company at $62 billion. Databricks has seen some incredible momentum this past year, with revenue growth accelerating to 60% year over year.

  5. Chime filed for IPO at the end of last month, adding to the growing roster of late stage companies looking to take advantage of an improving public market. The FinTech company plans to go public in 2025 and has selected Morgan Stanley to lead the public offering.

  6. We are still seeing an increased number of company shutdowns as the party round capital finally dries up. Bench was the most recent of these shutdowns. Bench, a VC-backed accounting startup, left thousands of customers locked out of their accounts after it suddenly shut down. The company will be acquired by Employer.com in a last minute fire sale.

  7. Nvidia has completed its acquisition of Run:AI, an AI infrastructure startup. As part of the merger, Run:ai said its software, which currently only works with Nvidia products, will be open sourced, meaning Nvidia rivals like AMD and Intel will be able to adapt it for their hardware.

  8. Battery Ventures is showing the VC to PE pathway with their buyout of RetailNext, a 17 year old startup that sells smart cameras to bricks-and-mortar retailers for measuring foot traffic. The private equity arm of Battery paid between $100 million and $200 million for the firm.

  9. AI Cloud Startup Vultr raised $333M at a $3.5B valuation this past. The round was co-led by AMD Ventures, underscoring the fierce competition between chipmakers to provide AI infrastructure for enterprises.

  10. AMD was busy this month, and also led a $250 million Series A raise for Liquid AI, valuing the company at over $2 billion. Liquid AI is aiming to build general purpose AI systems powered by a new type of AI model called a liquid neural network.

Why this matters: 2024 is officially behind us, and its the start of a new year! We will keep monitoring what all is going on the ecosystem, and how we see the landscape shaping up.

Startups that are hiring!

Open positions are per the company's website.

About ESO Fund

ESO Fund empowers startup employees to turn their stock options into reality. Since our inception in 2012, we've been dedicated to providing risk-free funding for the exercise of stock options, ensuring that individuals can seize the opportunities embedded in their equity.

Our mission is simple: to make equity compensation accessible and understandable. Through our innovative solutions, we've assisted countless individuals at 650+ companies in realizing the full value of their stock options, contributing to the success stories of numerous startup employees.

For more information on ESO Fund and how we can help fund your option exercise, please refer to our website at www.esofund.com!